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Investing.com-- S&P Global on Monday affirmed its credit rating on long-term U.S. debt, stating that “meaningful” tariff revenue is expected to offset other sources of fiscal pressure on the country.
S&P affirmed its AA+ long-term rating and its A-1+ rating short-term rating on U.S. debt, and maintained its long-term outlook at stable.
The ratings agency said that while it does not expect the U.S. fiscal deficit to improve in the coming years, it does not expect a persistent deterioration in fiscal health either, and sees the U.S. economy remaining robust.
“Changes underway in domestic and international policies won’t weigh on the resilience and diversity of the U.S. economy. And, in turn, broad revenue buoyancy, including robust tariff income, will offset any fiscal slippage from tax cuts and spending increases,” S&P analysts said in a note.
The ratings agency sees bipartisan issues such as raising the debt ceiling being resolved in a “timely fashion,” considering the dire consequences of not doing so.
U.S. customs receipts grew sharply this year as President Donald Trump’s tariffs took hold– surging to $27.7 billion in July from $7.1 billion a year ago, recent data showed. But the government deficit still grew nearly 20% in July to $291 billion, with the tariff revenue making little difference in the budget so far.
S&P said that it could lower the U.S. rating over the next two to three years if already high deficits increased, which it said could reflect “political inability to contain rising spending or to manage revenue implications from changes in the tax code.”
The ratings agency also flagged risks from doubts over long-term policymaking and the independence of the Federal Reserve. The latter has become a major point of contention for markets this year, amid a rapidly growing feud between Trump and the central bank over cutting interest rates further.
On the other hand, S&P said it could raise the U.S. rating in the coming years if public policymaking results in fiscal improvement and lower government deficits. Sustained strength in economic growth also stands to offset increases in government debt, which in turn boosts the U.S.’ creditworthiness.